Refer to the information for Musical Instruments Ltd. (MIL) in AP5-3.

Required:

1. Compute the following amounts:

a. Cash collected from customers

b. Cash paid to suppliers of merchandise

c. Cash received for sale of obsolete furniture

d. Cash received for sale of non-current investments.

2. Prepare a statement of cash flows for MIL for the year ended December 31, 2012. Use the direct method to report cash flows from operating activities.

3. Discuss the importance of the statement of cash flows to users of financial statements. What additional information does it provide that is not reported in the other financial statements? Explain by referring to the statement that you prepared in (2) above.